Bank of Hawaii (NYSE:BHC) is Hawaii’s second largest bank, with 28% of bank deposits in Hawaii and $10.5 billion in total assets. The company earns a significant portion of its revenues from its commercial and residential mortgages as well as from the fees that it charges to manage its clients’ investment accounts. The rest of the company’s revenue comes from the insurance products it offers, its credit card business, and the commercial and construction loans and leases it finances. Bank of Hawaii operates exclusively on Hawaii, Guam, nearby Pacific islands, and American Samoa.

BOH's conservative lending practices have shielded the company from the financial losses that have plagued other banks in the wake of the subprime lending crisis and U.S. housing market downturn. The bank did not hold any subprime mortgages during the crisis.[1] That's said, like most banks, it makes a significant portion of its revenue from residential and commercial real estate loans. Home values in Hawaii, the company's primary market, tumbled in 2008, reducing demand for the company's services.

The bank's concentration in Hawaii, also makes it vulnerable to economic downturns in the state.Rising airfares coupled with a general economic slow down have led to declining tourism. This is very significant because Hawaii is a state that relies heavily on tourism.

Company Overview

Bank of Hawaii Corporation operates as a diversified financial services company in the Central Pacific region through its primary subsidiary, Bank of Hawaii. Operating in over 70 branch locations, Bank of Hawaii provides consumers and corporations with a diverse array of financial products and services. Bank of Hawaii separates its businesses into four main segments: Retail Banking, Commercial Banking, Investment Services, and Treasury.

Business Overview

In 2009, BOH earned a total of $766 million in total revenues. This was a significant decline from its 2008 total revenues of $808 million. This had an adverse impact on BOH's net income. As a result, between 2008 and 2009, BOH's net income declined from $192 million in 2008 top $144 million in 2009.

Business Segments

Retail Banking

The Retail Banking segment provides small businesses and individuals with residential mortgage loans, automobile loans and leases, retail property and casualty insurance products, checking accounts, savings accounts, and time deposit accounts. Bank of Hawaii operates 71 branch locations, 409 ATMs, an online banking service (e-Bankoh), and a telephone banking service.

Commercial Banking

Bank of Hawaii's Commercial Banking segment provides companies in Hawaii with a wide range of financial products including: corporate banking, commercial real estate loans, lease financing, auto dealer financing, cash management products, and property and casualty insurance products. Commercial real estate mortgages are only offered to companies that are primarily based in Hawaii.

Investment Services

The Investment Services business segment is further divided into the private banking, trust services, asset management, and institutional investment advisory sectors. The private banking and trust services sectors assist high net worth individuals in managing their wealth by offering investment, credit, and trust advisory services. The asset management sector of Investment Services manages and creates investment portfolios for its clients. The institutional sales and services sector acts as a full service brokerage, providing equities, mutual funds, life insurance, and annuity products. The majority of the revenues in the Investment Services segment come from fees that Bank of Hawaii charges customers to manage their assets.


The Treasury business segment earns revenues by providing corporations with asset and liability management services, including interest rate risk management. The Treasury division also provides a foreign exchange service to its customers.

Trends & Forces

BOH is exposed to the slowing US economy

Because Bank of Hawaii operates exclusively in the US and does not plan on expanding its operations overseas, it is heavily dependent on the overall conditions of the US economy. According to the International Monetary Fund, global gross domestic product grew by an estimated 4.9%, but the U.S. GDP only grew by 2.2%, its lowest growth rate since 2002.[2] Increases in Global GDP will increase consumer spending and directly increase the need for financial services that banks provide. Moreover in Hawaii, the bank's home market, tourism is a main staple. During economic downturns, tourism tends to suffer disproportionately.


Bank of Hawaii's main competitors in Hawaii are First Hawaiian Bank, Central Pacific Financial, and American Savings Bank, a subsidiary of Hawaiian Electric Industries (HE). All competitors compete for market share in the Hawaiian islands, Guam, nearby Pacific islands, and American Samoa. Bank of Hawaii is the second largest bank holding company in Hawaii in terms of net income and revenue, behind First Hawaiian Bank, which is a subsidiary of BNP Paribas SA (BNPQY).

Unlike First Hawaiian Bank, Bank of Hawaii is not actively pursuing overseas expansion. First Hawaiian Bank has expanded its operating branches to Japan and Taiwan while Bank of Hawaii has not pursued any expansion strategies beyond the Central Pacific region, although it does hold foreign assets.[3][4] This strategy makes Bank of Hawaii Corporation more vulnerable to the overall US economy, but allows it to focus on expanding its market share in the Central Pacific region.


  1. Bank of Hawaii profits, stock up. Pacific Business News.
  2. IMF World Economic Outlook (WEO) - Housing and the Business Cycle, April 2008.
  3. First Hawaiian Bank 2007 Annual Report.
  4. BOH 10-K 2007.
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